By on May 4, 2010

The Competitive Enterprise Institute, a public interest group dedicated to free enterprise and limited government, has filed a complaint with the Federal Trade Commission, alleging that a recent advertisement from GM claiming to have “paid back government loans in full” is deceptive [full complaint in PDF here]. You might be able to guess why the CEI finds the GM ad so misleading, but if not, their explanation is after the jump.

The CEI admits that “In the press release on its ad campaign, GM at least hinted at the fact that there was more government money involved here than just the loan,” a statement that it believes reflects the whole truth of the matter.

But when it comes to GM’s ads, there is no mention whatsoever of this much larger portion of the federal government’s financing, or of the “first step” nature of GM’s loan repayment. All the public learns is that the government loan has been repaid, period. (“In full, with interest, five years ahead of the original schedule”.) Viewers will naturally think that this is the end of the story, when in fact there is still over $40 billion “in financing still outstanding” (to use the words of the Congressional Budget Office).

The failure of GM’s ads to make this clear is deceptive. GM’s statements are “likely to affect a consumer’s choice or conduct regarding” its products. As one leading scholar on advertising law has noted, there is a “well established principle … that advertisers be held responsible for implied, as well as express, misrepresentations.”8 In evaluating the truthfulness of ads, “the proper way to analyze [their] overall impact is to see the ads as consumers see them … rather than the way they might be technically analyzed.”

Most consumers would reasonably interpret GM’s ads as meaning both that GM has paid back all the money that it received from the government, and that those repayments were made with its own funds rather than with other government funds. Neither of these interpretations is accurate. While GM might argue that its ads are literally correct, they are deceptive within the meaning of the FTC Act because they leave a misleading impression with consumers

The CEI complaint notes that GM likely made this misleading statement in order to fool American consumers into believing that it no longer owes money to the US government, a perception that could help its business considerably.

Receiving bailouts at the expense of American taxpayers stuck at the very heart of GM’s image as an asset to America. Consumer purchasing decisions can easily be affected by such considerations, as the FTC has long recognized in prohibiting false claims that products are “Made in the U.S.A.” Indeed, the same buyers who prize “Made in the U.S.A.” cite concerns about GM’s bailout at taxpayer expense in explaining why they buy cars from Ford, the American automaker that did not receive a federal bailout

The complaint concludes with the CEI arguing that:

A prompt investigation by the FTC would serve the American public on this issue of major consumer and taxpayer importance. It would also discourage other beneficiaries of government bailouts from falsely misrepresenting their status.

We agree with the CEI’s assessment that GM mislead consumers, although as the complaint concedes, it did so in such a way that avoided an explicit lie. Whether the FTC will find so subtle a definition of deception actionable remains very much to be seen. Still, an investigation would certainly be welcome.

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26 Comments on “Competitive Enterprise Institute Files Deceptive Advertising Complaint Against GM...”


  • avatar
    bmoredlj

    I don’t really care if GM is officially sanctioned for deceptive advertising, but I’m glad there is a growing vocal objection to the deception exhibited in this advertisement. It’s enough for me that this ad not be allowed to stand without challenge. Hopefully there will be an investigation, one loud enough to elicit a response from GM. The nature of that response will be very telling: the inevitable denial of any wrongdoing would likely further damage GM’s image, as any such plea of innocence would require they at least bring up the fact that there is still outstanding financing, something not mentioned at all in the original ad. A quick admission of guilt and apology followed by an amended ad more clearly laying out GM’s true debt to America would be ideal, and the right thing to do, but this is (obviously) highly unlikely.

  • avatar
    ott

    What a crock. I can’t stand this kind of misleading drabble. Makes me lose faith in GM. If that’s even possible anymore.

  • avatar
    educatordan

    This story is sad and funny at the same time. The thing that bugs me the most is the way that bankruptcy has not humbled GM at all. They still think we’ll swallow whatever BS they serve us. Sorry guys it’s not 1970 anymore.

  • avatar
    getacargetacheck

    The CEI has an axe to grind — they don’t like any government involvement in anything. The GM commercial is misleading only to those who didn’t bother to learn the details of the bankruptcy. So, what’s GM supposed to do? Sit on its hands until it goes public (which it can’t do until people start buying their cars in greater numbers)? The CEI should go pound sand!

    • 0 avatar
      jkross22

      “The CEI has an axe to grind — they don’t like any government involvement in anything. The GM commercial is misleading only to those who didn’t bother to learn the details of the bankruptcy. So, what’s GM supposed to do? Sit on its hands until it goes public (which it can’t do until people start buying their cars in greater numbers)? The CEI should go pound sand!”

      Did you go to the CEI website? I’m guessing not based on your opinion of them. To answer your question, GM should have learned from past sins and gotten their house in order. Instead, it’s the same old smoke and mirrors game from them. Deflect blame and take credit for things they didn’t do. That’s the new GM.

      Meet the new boss, same as the old boss…

    • 0 avatar
      NulloModo

      It is admirable that GM has repaid the loan portion of its debt ahead of schedule. It is considerably less admirable that they did it with money that was a bailout loan in all but name, and are now crowing that they are basically debt free.

      You can’t expect the general public to know the ins and outs of the bailout and how it was structured (well, maybe you can, but you will be sorely disappointed if you do). The ad was obviously designed to target those who have a peripheral knowledge of the bailout and to make them believe GM is a healthy company whose amazing profits have bounced it right back out of the hole ahead of schedule, when the truth is anything but that.

      Had Whitacre gotten in front of the cameras and said something to the effect of ‘We at GM have faith in our future, we appreciate you, the taxpayers giving us the money to straighten things out, and we are so confident in our new products that we have paid off our loans early and are confident that we will be able to pay back the rest of the taxpayer investment in due time’ I wouldn’t have too much of a problem with it. As it is, the ad is clearly designed to mislead.

      This is GM once again showing that its only world class division is the marketing department. Why actually develop class leading products when you can BS your way into making people think the same old shit is suddenly worth their money.

  • avatar

    Anything that keeps the words “Government Motors” and “deceptive” mentioned in the daily news cycle is a plus in my book.

  • avatar
    gslippy

    I doubt whether this ad will have a material impact on sales, as misleading as it is.

    GM’s survival depends more on product and profitability than ad campaigns, which have been running for a century. One could point to any number of misleading ads run by the car companies, and GM is not alone in this.

  • avatar
    ChesterChi

    Maybe BP should have a commercial where they proudly tell us that they have cleaned up every drop of oil spilled by their CEO, conveniently leaving out the huge amount of oil that was spilled when the oil rig sank, which their CEO did not directly cause because he was in his office at the time, and not on the oil rig.

  • avatar
    mhadi

    I agree with the poster than GM is still the same arrogant company, same lies and attitude as before.

    You should read GMs wikipedia entry – completely misleading and written in such a postive light that it you feel nauseated.

    Thank goodness for this site that keeps tabs on GM.

  • avatar
    Rusted Source

    I’m Ed Whitacre from General Motors.

    Hey Ed, how’s it hangin?

    A lot of Americans didn’t agree with giving GM a second chance, quite frankly I can respect that.

    Thank you for your committment to the highest level of lip service in America.

    We want to make this a company all Americans can be proud of again.

    I don’t think all Americans were actually proud of it before.

    That’s why I’m here to announce we have repaid our government loan, in full, with interest, five years ahead of the original schedule.

    Ed, you wily old fox you. Nice job only specifically mentioning one loan.

    But there’s still more to do.

    You mean there’s more loans to repay?

    Our goal is to exceed every expectation you’ve set for us.

    Careful there Ed, you may not like to hear what some of those expectations are.

    We’re putting people back to work, designing, building and selling the best cars and trucks in the world

    Like the fine folks in Antwerp and possibly some of the dealers who cried foul after you shuttered them, to mention a few

    With our 100,000 mile/5 year powertrain warranty to guarantee the quality, and the unmatched life saving technology of OnStar to help keep you safe. From new energy solutions, to the designs of tomorrow, we invite you to take a look at the new GM.

    I thought warranties guarantee a response to the absense of quality. Is the warranty optional like the life saving OnStar technology?

    New GM – new cars, previous model year BS.

  • avatar
    frank rizzo

    This complaint is pathetic. Where was the CEI when the Bush Administration was logging Iraq war spending under emergency budget measures so as not to include in budget deficit projections? And Rep. Issa with all his objections? I really hate the selective opinions regarding what is govt waste and what isn’t. I’m pretty sure our investment in GM, even if at a loss, will yield a greater present value that our investment in lost American lives and dollars in Iraq.

    • 0 avatar
      Daanii2

      The complaint is not about government waste. The complaint is about deceptive advertising. Like it or not, GM’s commercial is deceptive under the usual legal analysis. While literally true, it is misleading. Shame on GM for running it.

    • 0 avatar

      Actually, the CEI was outspoken in its criticism of Bush administration spending policies.

    • 0 avatar
      frank rizzo

      I doubt we’d give a shit if the commercial was deceptive about something that a majority viewed as good. The comment is about government waste and being deceptive about accounting of govt waste. Shame on those, CEI, Issa, and others, looking the other way when convenient relative to one’s preferences.

    • 0 avatar
      frank rizzo

      @Ronnie: I’d love to see an article in which the CEI took a stand against Bush’s accounting policies. Spending is not the issue if transparent. Acting like it’s not there is.

    • 0 avatar
      geeber

      frank rizzo: I doubt we’d give a shit if the commercial was deceptive about something that a majority viewed as good.

      The Competitive Enterprise Institute’s (CEI) complaint is that the commercial is deceptive. Whether some people think that the bailout is a good thing is irrelevant. The institute would be opposed to the bailout on principle, even if the majority of people thought that it was a good idea, as its employees do not have to run for office.

      frank rizzo: The comment is about government waste and being deceptive about accounting of govt waste.

      And the complaint is about an allegedly deceptive advertisement put out by GM. It is not about wasteful government spending.

      frank rizzo: Spending is not the issue if transparent. Acting like it’s not there is.

      Again, the issue with this particular story is not government spending. It is an allegedly misleading advertisement by a company that received a federal bailout, first from the Bush Administration, then from the Obama Administration.

      If you have an example of a company that was bailed out by the Bush Administration, and then ran misleading advertisements saying it had paid back all of the government money it had received, while the CEI did nothing, then please share it with us.

  • avatar

    If this was cooked up by GM alone, without any input from the Obama administration, then Whitacre is completely incompetent. If GM went ahead because of pressure from the administration, then Whitacre is just mostly incompetent. I suspect this ad campaign has politicos’ hands all over it.

  • avatar
    TonyJZX

    strong sense of “reap what you sow” here…

  • avatar
    1996MEdition

    It’s OK to lie kids…..everyone does it:

    “In full, with interest, five years ahead of the original schedule”

    “Mission accomplished”

    “What is the definition of ‘is’?”

    “I did not have sexual relations with that woman”

    “Read my lips…..No new taxes”

    I didn’t vote for them and I certainly won’t buy anything from them.

  • avatar
    Steven02

    Sorry guys, but the CEI is being pretty lame here. GM has repaid the loan. The rest of the gov’t involvement is a 61% stake in ownership. If I bought a stake in a company, I don’t see it as the company owing me anything. I own part of the company. Kind of like how anyone buys stock. So when GM tells the truth, apparently they are ridiculed for that as well.

    Also, if CEI really wants to do something, perhaps they should be looking at perfume commercials. I don’t look like any of those models who are in the commercials. I don’t have a girl who looks like those girls either.

    How about the Taco Bell ads with the guy ordering the cheap burrito. I have never seen a Taco Bell employee look that good.

    But, if you really want to see a lack of truth in advertising, why not just watch QVC or of those call in to buy ads… if you are one of the next 500 callers or call in the next 20 minutes, you get a special deal.

    CEI doing anything about that?

  • avatar
    Rusted Source

    To the GM apologists here stating the 61% ownership stake in GM is a glowing “investment opportunity”, here’s my issue and may be shared by others here on TTAC. That 61% stake is useless if GM doesn’t start making strides forward to become a viable, profitable company. If they make it to an IPO and the government re-cooperates even 1/4 of that ownership, is that a success? what about 1/8 or 1/16? What will we call the money lost then, a business expense?

    To win the public’s favor, sometimes you have to bring yourself low, admit your mistakes and ask for help while showing repentance to the mistakes of the past. Showing future vehicles in commercials as a regular staple, hosting a my-car-is-better-than-your-car campaign, and boasting about paying off loans early (in full… with interest… 5 years ahead of schedule) just sends the message of “One day you people will realize you have it all wrong, then you’ll be begging to own a GM product”.

    Take a look at Ford, they took the high road. They could have pointed out over and again how GM and Chrysler took the bailout but instead they let the public develop their own opinion about Ford and at the same time keep trying to become a better company (improving financial position, bringing smaller cars that people desire, successfully selling off Volvo for real money).

    GM has some decent cars, but nobody likes to buy tainted goods no matter how shiny they look.

  • avatar
    jmatt

    Frank Rizzo said: “Where was the CEI when the Bush Administration was logging Iraq war blah blah blah”

    So, GM gets caught airing fraudulent ads and the left’s response is… drum roll, please… Bush did it.

    And nobody seems to be mentioning the fact that the reason GM is doing this is so that it can receive another ten billion in corporate / union welfare being made available by the Department of Energy. So they pay back six billion at 7% with taxpayer money and pick up another ten billion at 5%.

    So at the end of the day, GM cheats the taxpayers out of 2% interest by using other taxpayer money, and lines itself up for another ten billion dollar handout courtesy of those same taxpayers.

    And suddenly the left, which usually whines about corporate welfare, is falling in love with it.

    But never mind all that. Bush did it!


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